USATF settled/settling a lawsuit for $395,000 in 2017. What was/is that for?

Using justia.com and searching for "track and field" filed in 2016 I see the Run Gum suit (Gold Medal LLC) which was dismissed and I see USATF v. Leach which included counterclaims against USATF.

https://dockets.justia.com/docket/indiana/insdce/1:2016cv01828/66914

As a corporate man I can't use my PACER access to look up the current details. This is a limited search and might not be it at all. For instance a slip and fall claim in a state court would not be included where I looked.

I'm pretty sure it was the youth committee lawsuit. The one where USATF sued the youth executive committee and ended up having to settle and pay the legal bills on both sides, probably extra on top of that. My hunch is that they ended up settling for more than that number, but I don't _know_

That number does not include USATF's lawyers' fees, I'm sure they spent well over a million dollars when this was all said and done.

Didnt Max's US Marine body guard beat the crap out of some clown who threatened Max at Indy Airport?

If you read the first part of Note 12 on page 18, it explains that they received a bonus in 2014 in the amount of $25 million (which consisted of 3 payments) in exchange for entering into a sponsorship contract through 2040, or roughly 26-27, depending on when exactly the contract was executed and the exact end date. The bonus is being recognized as revenue over the sponsorship period, or roughly $925,000 - $960,000 per year, depending on the exact period (26-27 years). So, each year, you would expect that asset to be reduced by an amount in that range until 2040, when the balance of the asset will be $0. It is an asset because it represents a future benefit to the USATF. As the benefit gets used up (recognized as revenue) the value of the asset decreases.

Dust wrote:

If you read the first part of Note 12 on page 18, it explains that they received a bonus in 2014 in the amount of $25 million (which consisted of 3 payments) in exchange for entering into a sponsorship contract through 2040, or roughly 26-27, depending on when exactly the contract was executed and the exact end date. The bonus is being recognized as revenue over the sponsorship period, or roughly $925,000 - $960,000 per year, depending on the exact period (26-27 years). So, each year, you would expect that asset to be reduced by an amount in that range until 2040, when the balance of the asset will be $0. It is an asset because it represents a future benefit to the USATF. As the benefit gets used up (recognized as revenue) the value of the asset decreases.

Is it related to a fee/commission to an outside law firm/agent that negotiated their contracts?

I cancelled my usatf membership years ago due to its managements chicanery.

It's related to that but I still don't fully understand it. Dust help us out:

Let's just use $25 million over 25 years and assume a one-time payment to make the numbers round.

USATF signs the contract for up to $500 million over 25 years with Nike and there is a provision in there that they also get a $25 signing bonus of sorts. The caveat however is that if the contract is cancelled the $25 million bonus has to be repaid on a pro-rata basis. So if the contract is cancelled after 5 years, USATF could keep $5 million but would have to return the remaining 20 million.

So in year one USATF gets the $25 million advance in cash and puts it on the books. However, in reality that full $25 million isn't theirs. They only get to keep $1 million of it if the contract was cancelled in year 1.

So I can see how they'd put $25 million cash in the books and then a Liabilty of $24 million for what they would have to pay back if the contract was cancelled. Each year then I would expect them to report $1 million in income from the advance and to reduce the amount of the liability by 1 million.

But I don't see why they also create an asset for the $25 million when they got cash for it. What am I missing?

I'll take a stab at this. To be clear, there are 2 things happening.

First, there is this signing bonus. The journal entry for initial receipt would look something like this:

dr Cash 25M

cr Unearned Revenue 25M

and recognizing an annual amount as follows:

dr Unearned Revenue 1M

cr Revenue 1M

Second, there is this commission paid by USATF to Max Siegel, Steve Miller and/or their buddies who negotiated the Nike contract (it's such a clusterfuck of self-dealing that I can't recall). Basically it sounds like they are using the "signing bonus" to pay this commission.

dr Deferred Commission Expense (Asset) 25M

cr Commission Payable (Liab) 25M

and recognizing an annual amount as follows:

dr Current Commission Expense (Exp) 1M

cr Deferred Commission Expense (Asset) 1M

dr Commission Payable (Liab) 1M

cr Cash (Asset) 1M

The deferred commission expense is technically an asset. Their auditor, CliftonLarsonAllen, is reputable.

You're losing me on the commission paid to the group that negotiated the deal. Why are their 4 entries each year instead of 2? I'm not following why it's an asset. Say they signed the deal and are due $25 million over the course of the Nike contract. Why is any of this an asset or liability each year? I'm assuming if the contract got cancelled they then wouldn't get a commission on that portion of the contract. So couldn't they just treat each year separately? But even if they can't I'm not following what you have below.

numbers guy wrote:

Second, there is this commission paid by USATF to Max Siegel, Steve Miller and/or their buddies who negotiated the Nike contract (it's such a clusterfuck of self-dealing that I can't recall). Basically it sounds like they are using the "signing bonus" to pay this commission.

dr Deferred Commission Expense (Asset) 25M

cr Commission Payable (Liab) 25M

and recognizing an annual amount as follows:

dr Current Commission Expense (Exp) 1M

cr Deferred Commission Expense (Asset) 1M

dr Commission Payable (Liab) 1M

cr Cash (Asset) 1M

The deferred commission expense is technically an asset. Their auditor, CliftonLarsonAllen, is reputable.

Sounds like they may have paid a commission for the negotiation of the contract. Perhaps this payment instead of running directly through the P&L as a one time charge was booked as an asset over the life of the contract. The contract has a defined term so the commission expense is recognized over that defined period.

This is how a leasing commission paid at the outset of a lease would be treated for GAAP purposes.

Number aren’t nice wrote:

Sounds like they may have paid a commission for the negotiation of the contract. Perhaps this payment instead of running directly through the P&L as a one time charge was booked as an asset over the life of the contract. The contract has a defined term so the commission expense is recognized over that defined period.

This is how a leasing commission paid at the outset of a lease would be treated for GAAP purposes.

I would think it would be classified as a potential liability rather than an asset, but there's probably some creative accounting going on at this so-called nonprofit.

We got rid of the AAU, in the 70s, now the sport is saddled with this sleight of hand bullsheet.

This is correct. It's asset/liability matching principles in accounting. If you notice, they have both a short term asset/liability and long term asset/liability set up for both the initial commissions paid (capitalized asset) and the incurred liability (contractual obligation).

As to why it's an asset in the first place when it's related to commissions paid, it's similar to other industries which have acquisition costs. You can think of the large commission paid as acquisition cost to secure the contract and consequently the long term revenue. If they don't get to recognize all the revenue right away (since they haven't earned it yet), they also don't get to recognize all the expense right away either (since it hasn't been incurred yet). Even though they've paid it all, it's related to acquiring a long-term benefit they've obtained via the long-term contract. So they set up an asset that will be amortized over time. I think it's essentially like a deferred acquisition cost (DAC), which you can find in many other industries that deal with long-term contracts. Life insurance is an example.

Gramps wrote:

Number aren’t nice wrote:

Sounds like they may have paid a commission for the negotiation of the contract. Perhaps this payment instead of running directly through the P&L as a one time charge was booked as an asset over the life of the contract. The contract has a defined term so the commission expense is recognized over that defined period.

This is how a leasing commission paid at the outset of a lease would be treated for GAAP purposes.

I would think it would be classified as a potential liability rather than an asset, but there's probably some creative accounting going on at this so-called nonprofit.

We got rid of the AAU, in the 70s, now the sport is saddled with this sleight of hand bullsheet.

This type of attitude/trolling always makes me laugh. Essentially you're saying "I don't fully understand what's going on, but I have an ax to grind. So I'm going to assume something underhanded and shady is going on and put my ignorance on full display."

Your as dumb as the trollers.

This type of of bonus is absurd. Max is a paid professional to do these type of deals. Not broker it out.

Nike was already standing in line with a bag on money to do the deal. No other shoe company was even given a chance.

We all understand very well what happened, what is in question is how they crafted the books to cover the bonus. What are the details of the bonus, is it on-going or a one time fee.

Transparency would clear up a lot of things in this case or as in case nothing is transparent with USATF.

At some point a forensic accounting audit will happen when they slip up and we all will get know the truth. Good or bad.

[quote]wejo wrote:

You're losing me on the commission paid to the group that negotiated the deal.

>>>> from

https://www.washingtonpost.com/sports/olympics/usa-track-and-field-ceo-has-alarmed-some-insiders-with-his-spending-and-style/2016/10/07/ca470956-8a35-11e6-875e-2c1bfe943b66_story.html?utm_term=.747b41428add

"USA Track and Field board chairman Steve Miller defended Siegel’s compensation and perks as necessary to retain the most successful deal-maker in the nonprofit’s history. But Miller also acknowledged that the deal that produced most of that new income — a long-term sponsorship agreement with Nike worth a reported $500 million — was primarily negotiated by two former Nike executives whose small consulting firm is collecting$23.75 million in commission payments from USA Track and Field through 2039"

Inept but clever wrote:

Your as dumb as the trollers.

This type of of bonus is absurd. Max is a paid professional to do these type of deals. Not broker it out.

Nike was already standing in line with a bag on money to do the deal. No other shoe company was even given a chance.

We all understand very well what happened, what is in question is how they crafted the books to cover the bonus. What are the details of the bonus, is it on-going or a one time fee.

Transparency would clear up a lot of things in this case or as in case nothing is transparent with USATF.

At some point a forensic accounting audit will happen when they slip up and we all will get know the truth. Good or bad.

And Max appears to be earning substantial bonuses... presumably based in large part of the Nike contract that we are also paying someone else for negotiating.

His base salary is around $500,000, and he has made an additional $1 million or so in bonuses the past few years, making him by far the highest paid CEO in US Olympic Sports.

How in the hell can you be so dense Wejo?!?!?!

Inept but clever wrote:

Your as dumb as the trollers.

This type of of bonus is absurd. Max is a paid professional to do these type of deals. Not broker it out.

Nike was already standing in line with a bag on money to do the deal. No other shoe company was even given a chance.

We all understand very well what happened, what is in question is how they crafted the books to cover the bonus. What are the details of the bonus, is it on-going or a one time fee.

Transparency would clear up a lot of things in this case or as in case nothing is transparent with USATF.

At some point a forensic accounting audit will happen when they slip up and we all will get know the truth. Good or bad.

+1

Well done. My thoughts, precisely.

A non-profit 501c3 should have transparency and not try to obfuscate its financial transactions.

You must have little experience with non-profits.

This analysis is correct. To clarify, the commission liability is for the marketing agency, not Max or Board members. It is confusing since the Nike to USATF "signing bonus" is the same as the long term commitment to pay the agency (at least in the example created by Numbers Guy).

Revenue side - when you get a signing bonus on a long term contract, you spread that bonus over the contract period. That is a liability that "amortizes" into revenue over time. It is a liability because you have the cash but have to still earn it (and, if you defaulted on the contract, might owe some of it back).

Liability side - they owe that agency 25M over roughly 25 years. That expense is spread over the contract period. The four line entry above might make more sense if split into two sections - the "asset" is reduced each year to recognize the expense. Then you have the actual cash paid out (and reduction of the liability).

Note: Clifton is reputable but I recall USAFB fired the auditors in place when Max was hired (and in place for a long time), also reputable. I recall board minutes referred to a disagreement with he former auditors - I think it was related to the "related party transactions" with Max's company. This was all before the Nike deal. Also possible the former auditor bailed due to turnover in top finance staff (with downgrades each time as the four people held the job over four years).